Louis Vuitton Moët Hennessy, the world’s leading luxury brand, made the decision to formally enter India in 1999. India was a familiar market for Louis Vuitton as the company had filled custom orders from maharajahs since the late 19th century. However, the Indian market was unlike any in which the company was currently operating. The changing socio-economic conditions of the developing nation opened up opportunities for the brand but also posed unique challenges such as changing customer profiles and concepts of luxury.
In the West, luxury goods are often sold through company-owned stores in a luxury retail cluster spread over several blocks, usually in a city’s downtown core. In cities that did not have luxury retail clusters, Louis Vuitton operated in luxury malls. Previous attempts to develop premium retail space in India had not been successful. Nevertheless, several real-estate entrepreneurs had plans to open an estimated 300 luxury malls in India by 2010. In India, Louis Vuitton’s first two stores were introduced in luxury malls in New Delhi and Mumbai targeting customers who had shopped abroad and were familiar with the brand. The company was now looking to increase its reach and teamed up with other global brands to develop luxury malls in five Indian metros.
Does a high-end brand have a market in a low income country? According to the National Council of Applied Economic Research, in 2001-02 there were 20,000 families in India with annual incomes greater than INR100 million. This number is expected to grow to 140,000 by 2010. Although 87% of the Indian population lives on an income of less than $2.50 per day the high net worth consumers, which are the primary target of high-end brands, is growing. Although the maharajahs had lost much in 1956 and 1971, they were still significantly influential and formed the new elite that would be the new generation of customers for Louis Vuitton (LV) along with Bollywood actors, politicians, and bureaucrats. Exclusivity is a main factor in maintaining the gap between the super-rich and other consumers. Since LV caters to this need, they have an edge that allows them to charge the premiums on their goods. Every market in the world will have consumers that desire to stand out, be recognized as special, and feed their egos. Whether they are looking for superior functionality and quality, a status symbol that shows they have “arrived”, or self-indulgence, every free market seeks to satisfy these needs and, as such, there will always be a desire for luxury goods.
Where should this high-end brand find its niche?
For centuries the maharajas of India held vast amounts of disposable income and enjoyed spending their money on luxury items as a show of class distinction. These maharajahs and their families knew LV very well and continued to buy LV products up until they finally lost power in 1971 following the States Reorganisation Act of 1956. From that point forward LV tried to connect with the country’s new rich: owners of businesses, CEOs of companies, and Bollywood actors. In India, the super-rich sought to “make statements” about their status. One way to show it was by buying expensive products that were out of reach to the vast majority of the population.
Today, India is one of the fastest growing economies in the world, second to only China, and has seen an exponential increase in the number of middle and upper class families with high net worth (HNW) or liquid assets in excess of $100 million. India’s economic boom continued to add families to this class. These newly-rich had extra disposable income and were starting to sample the good life by purchasing luxury items for the first time. The idea was that these consumers would get a taste of the finer things and would hopefully become customers for life. These consumers are exactly who LV was targeting with their expansion plans.
Louis Vuitton decided to target these...